Financial Accounting Exam 1 Study Guide.
Accounts payable - answera liability backed by the general reputation and credit standing of
the debtor
accounting - answerthe information system that measures business activities, processes that
information into reports and financial statements, and com...
Accounts payable - answer✔a liability backed by the general reputation and credit standing of
the debtor
accounting - answer✔the information system that measures business activities, processes that
information into reports and financial statements, and communicates the results to decision
makers
asset - answer✔an economic resource that is expected to be a benefit in the future
balance sheet - answer✔list of an entity's assets, liabilities, and owners' equity as of a specific
date
board of directors - answer✔group elected by the stockholders to set a policy for a corporation
and to appoint its officers
cash - answer✔money and any medium of exchange that a bank accepts at face value
corporation - answer✔a business owned by stockholders. a corporation is a legal entity, an
"artificial person" in the eyes of the law
current asset - answer✔an asset that is expected to converted into cash, sold, or consumed during
the next 12 months, or within the business's normal operating cycle if longer than a year
current liability - answer✔a debt due to be paid within one year or within the entity's operating
cycle
deficit - answer✔negative balance in retained earnings caused by net loss over a period of a year
dividends - answer✔distributions by a corporation to its stockholders
entity - answer✔an organization or a section of an organization that, for accounting purposes,
stands apart from other organizations and individuals as a separate economic unit
ethics - answer✔standards of right and wrong that transcend economic and legal boundaries.
ethical standards that deal with the way we treat others and restrain our own actions because of
the desire, expectations, or rights of others, or with our obligations to them
expenses - answer✔decrease in retained earnings that results from operations; the cost of doing
business; opposite of revenues
fair value - answer✔the amount that a business could sell an asset for, or the amount that a
business could pay to settle a liability
financial accounting - answer✔the branch of accounting that provides information to people
outside of the firm
financial statements - answer✔business documents that report financial information about a
business entity to decision makers
financing activities - answer✔activities that obtain from investors and creditors the cash needed
to launch and sustain the business; a section of the statement of cash flows
generally accepted accounting principles - answer✔accounting guidelines, formulated by the
financial accounting standards board, that govern how accounting is practiced
going-concern assumption - answer✔holds that the entity will remain in operation for the
foreseeable future
historical cost principle - answer✔principle that states that assets and services should be recorded
as their actual cost
income statement - answer✔a financial statement listing an entity's revenues, expenses, and net
income or net loss for a specific period
investing activities - answer✔activities that increase or decrease the long-term assets available to
the business; a section of the statement of cash flows
liability - answer✔an economic obligation payable to an individual or an organization outside of
the business
long-term debt - answer✔a liability that falls due beyond one year from the date of the financial
statements
managerial accounting - answer✔the branch of accounting that generates information for the
internal decision makers of a business, such as top executives
merchandise inventory - answer✔the merchandise that a company sells to customers
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